Brookfield Property Partners INVESTOR DAY SEPTEMBER 26, 2018
Agenda Overview & BPY’s 5 -Year Evolution 3 Brian Kingston, Senior Managing Partner & CEO GGP & the U.S. Retail Opportunity 22 Brian Kingston, Senior Managing Partner & CEO Financial Update 45 Bryan Davis, Managing Partner & CFO Brookfield’s Multifamily Business 59 Ric Clark, Senior Managing Partner & Chairman 2
Brookfield Property Partners (“BPY”) was launched in 2013 as Brookfield’s primary vehicle to make investments across all strategies in real estate 3
At the time of launch, approximately 80% of BPY’s invested capital was held in the form of other public real estate securities… 4
Major acquisitions in the past five years… Total Assets TODAY ~$90B 2018 $40B 2017 Total Assets Q2 2013 $6B 2016 ~$31B $3B 2015 $12B 2014 $30B 5
Invested capital by sector 2013 2018 17% 51% 5% 41% 20% 100% DIRECT DIRECT 42% 44% Office Retail LP Investments Office Retail LP Invesments • Multifamily • Multifamily • Logistics • Logistics • Hospitality • Triple Net Lease • Self-Storage • Student Housing • Manufactured Housing 6
One of the world’s largest, highest quality portfolios Brookfield Place Fashion Show New York Las Vegas Canary Wharf First Canadian Place Potsdamer Platz London Toronto Berlin 7
~$90B Property AUM CANADA UK & EUROPE $4.7B $11.7B UNITED STATES $63.1B BRAZIL ASIA & AUSTRALIA $0.9B $6.7B 8
Projects delivered over the past 24 months… 4.2M SF PREMIER OFFICE SPACE 5 Manhattan West One Blue Slip New York Brooklyn 1,200 APARTMENT UNITS Principal Place The Eugene London Wall Place London New York London 9
Projects on schedule for delivery in 2019 5.6M SF PREMIER OFFICE SPACE ICD Brookfield Place Camarillo 1 Bank Street Dubai London Los Angeles ~3,500 APARTMENT UNITS 655 New York Ave 100 Bishopsgate 1 Manhattan West Washington DC London New York 10
Capital deployment & recycling 1 2 Target Sector Identify Opportunities / Geography / Invest Capital 3 4 Create Maximum Value Strategic Exits to Maximize Returns 11
Case Study: IDI Gazeley projected to return 30% IRR in 5 years • Assembled a 42M SF global logistics business through the acquisition of 3 industrial companies in North America and Europe 50M SF 16% AREA LEASED RENT INCREASED 88 – 95% 30M SF COMPLETED CHANGE IN OPERATING DEVELOPMENT OCCUPANCY 2013-2017 30% 3.1x PROJECTED PROJECTED GROSS IRR GROSS MOC 12
Case Study: Simply Self Storage returned 46% IRR in 2.5 years • Acquired 90-asset, 6.8M SF portfolio and operating company in early 2016 and grew business to over 200 assets totaling ~16M SF 32% VALUE INCREASED PSF $1.3B $162M GROSS SALE PRICE* NET PROCEEDS TO BPY** 46% 2.6x GROSS IRR GROSS MOC *Partial sale of business **Includes proceeds from portfolio refinancing following transaction 13
Five-year asset sales recap • In BPY’s first 5 years, we have completed over $47B of gross asset sales that were transacted at an average 4% premium over our carrying IFRS values ($’M @100%) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - 2013 2014 2015 2016 2017 Gross Sales Price IFRS Value 14
Opportunistic real estate funds track record Total BPY Projected Projected Fund Inception Equity Stake Gross IRR Gross MOC RE Opportunity Fund I 2006 11.0% 1.9x GGP Acquisition RE Opportunity Fund II 2007 20.0% 2.1x Closes RE Turnaround Fund 2009 38.6% 2.3x Strategic Real Estate 2012 $4.5B 30% 25.0% 2.7x Partners I Strategic Real Estate 2015 $9.0B 25% 19.0% 2.2x Partners II Total 26.0% 2.2x 15
POLLING QUESTION #1 BPY trades at a 30% discount to NAV. What more can we do? A. Reduce leverage B. Buy back our units C. Simplify our business D. Improve disclosure / investor communication 16
Investment and Operating Segments 17
High-quality core office assets 46M PROPORTIONATE OFFICE SF Grace Building Amex House First Canadian Place New York Sydney Toronto $1.4B PROPORTIONATE NOI* Canary Wharf Brookfield Place London New York 93% OCCUPANCY FL3500 Eichhornstraße 3 São Paulo Berlin * Last 12 Months at June 30, 2018 18
Highly productive best-in-class malls and urban retail 122M PREMIER RETAIL SF GGP Acquisition Closes $1.7B Fashion Show Oakbrook Las Vegas Illinois PROPORTIONATE NOI* 95% NOI-WEIGHTED TOTAL OCCUPANCY Stonebriar Centre The Shops at LaCantera Frisco San Antonio * Last 12 Months at June 30, 2018 (proportionate NOI post closing of GGP, adjusted for asset sales at closing) 19
LP investments in mispriced assets with upside to earn outsized returns The Diplomat Resort & Spa Conrad Hotel Florida Seoul Wynyard Place Center Parcs Sydney U.K. 1,400+ $5.8B $781M NO. OF PROPERTY INVESTED CAPITAL PROPORTIONATE INTERESTS IN BAM PRIVATE FUNDS NOI* * Last 12 Months at June 30, 2018 20
POLLING QUESTION #2 Which sector do you think offers the best risk-adjusted returns over the next 5 years? A. Office B. Retail C. Industrial D. Multifamily 21
GGP & the U.S. Retail Opportunity 22
GGP transaction summary 1 2 3 Shareholder approval Offer price Issued 160M of BPR shares & July 26, 2018 $23.50/share 110M of BPY units Acquisition completed BPY’s public float August 28, 2018 increased by ~$6B 23
The acquisition of GGP plays to Brookfield’s core investing principles Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 24
GGP owns 8% of the high-quality retail space in the U.S. Retail GLA 1.2B SF (4 SF Per Person) (SF Per Person) of High-Quality Retail GLA in the U.S. 8% 24 U.S. OWNED BY GGP 16 Canada Australia 11 92% OTHERS U.K. 5 25
The acquisition of GGP plays to Brookfield’s core investing principles Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 26
Doubling down on retail by capturing opportunistic market window… Regional Mall Index Performance* July 2016 Peak March 2018 GGP price agreed 2015 2016 2017 2018 2015 2016 2017 2018 Aug 2018 *Source: FTSE NAREIT 27
The acquisition of GGP plays to Brookfield’s core investing principles Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 28
We are uniquely positioned to capitalize on value- add opportunities… Complete Redevelopment Initiatives Oakbrook Center Oakbrook, Illinois Identify and Execute Densification Opportunities Ala Moana Optimize Tenant Mix Honolulu, Hawaii Drive Operating Performance Village of Merrick Park Coral Gables, Florida 29
From retail centers to mixed-use, live-work- play destinations… Brookfield can control the redevelopment process across multiple asset classes and capitalize on the value-add beyond retail 30
We tailor value creation strategy for malls with different attributes… EXPAND DENSIFY Mall Productivity AVOID REDEVELOP Land Value 31
Value Creation Strategy EXPAND Mall Productivity Baybrook Mall (TX) Land Value 32
Case Study 1 – Baybrook Mall Expansion Acquired Land for Expanded Added Outdoor F&B Lifestyle Center Power Center and Entertainment Before After Post Development Yield on Cost 7.5% 33
Value Creation Strategy EXPAND DENSIFY Mall Productivity Baybrook Mall (TX) Ala Moana Center (HI) Land Value 34
Case Study 2 – Ala Moana Center Densification Replaced Anchor Added Residential Density Placemaking Before After Phase 1 Yield on Cost 9.6% / Phase 2 Yield on Cost 6.9% 35
Value Creation Strategy EXPAND DENSIFY Mall Productivity Baybrook Mall (TX) Ala Moana Center (HI) REDEVELOP NewPark Mall (CA) Land Value 36
Case Study 3 – NewPark Mall Redevelopment Replaced Redeveloped Developed Land to Anchor Vacant Box Highest & Best Use Before After Phase 1 Yield on Cost 8.5% / Phase 2 Yield on Cost 7.1% 37
Create value via redevelopment initiatives… $1.1B 8.8% Historical Redevelopment TOTAL YIELD COST ON COST $1.6B 7.9% Projects Under Redevelopment ESTIMATED YIELD COST ON COST Average Yield on Cost 7.9% - 8.8% 38
The acquisition of GGP plays to Brookfield’s core investing principles Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 39
POLLING QUESTION #3 Today, e-commerce makes up less than 10% of total retail sales in the U.S. What do you think the percentage will be in five years? A. Less than 10% B. 10%-20% C. 20%-30% D. More than 30% 40
E-commerce vs Brick-and-Mortar? NOT a Zero- Sum Game… ONE Channel Brick-and-Mortar E-Commerce Online-to-offline examples Amazon Bonobos Rent the Runway 93% of all retail sales are owed all or in part to brick-and-mortar presence * * U.S. Census Bureau 41
The acquisition of GGP plays to Brookfield’s core investing principles Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 42
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